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04 November 2018

Capturing customer growth

David Power, CEO, KFH Malaysia, speaks to Islamic Business & Finance about how KFH Malaysia has rebuilt itself to better serve its evolving customer base. EDITOR'S PICKSUNDAY 04, NOVEMBER 2018


What has been the plan in 2018, and how have you worked to achieve it?
There were a couple of areas that we focused on after a solid 2017 performance that saw the bank returning to profit for the first time in a number of years. First and foremost was the restructure of our balance sheet ensuring that we build sustainability into our earnings for 2018 and beyond. In 2017 we did a complete review of our risk framework which included a review of the credit policies, target market risk acceptance criteria (TMRAC), risk architecture and process flow. This was successfully implemented during Q2 of 2018.

Next was to acquire new to bank customers whilst at the same time ensuring that we retain our existing customers that fitted our new segments and acceptance criteria. Finally, we also completely revamped our HR approach and policies making a concerted effort to not only become a ‘great place to bank’ but also a ‘great place to work’. A new framework was implemented that focusses on performance and is aligned with group practices. We also implemented a number of key staff engagement strategies, which over time will significantly improve our overall engagement scores.

After a successful 2017, how has 2018 been from a performance standpoint?
2018 was always going to be the year we started to rebuild the business. This meant that we needed to take a long, hard look at our existing customer base to ensure that they were in the right market segment but more importantly in line with our revised risk acceptance criteria. This has seen a re-alignment in our balance sheet to longer-term sustainable asset acquisition and the movement away from some higher risk short-term assets.

Global uncertainty has also played a role in the slowdown in corporate activity in the region but despite this we are comfortable with the progress that has been made to date and are confident that we are well placed to capture growth as the economy begins to turn. Overall the year has been a successful one and we are on track to meet or even exceed our yearend goals. The group has also been incredibly supportive during this period of change and it has been a strong sense of comfort knowing that we have such a strong shareholder supporting us in these ever-changing times.

What have been the major milestones for KFH Malaysia so far this year?
We have had a number of key successes this year, most notably our core banking upgrade which has brought the bank right up to date with our IT infrastructure. Over and above this we did a complete revamp of our DR infrastructure and upgraded our cards platform with the latest version. We also launched our brand-new website which is using the latest technology thereby also enhancing our customer experience.

On the business side our retail franchise has continued to grow month-on-month and most notably with regard to new to bank customers. We have also launched a number of new products, which has given us more exposure to the very competitive Malaysian banking sector.

You recently refreshed your website. What was the rationale behind this move?
As highlighted above, a core focus of 2018 was replacing and improving the infrastructure of the bank. The website is the window into the bank and hence it was key that this too be updated along with the tech refresh that we were undergoing. We also had not refreshed the look for close to 13 years, so it was time that this be done using the latest web design along with the help of our parents in Kuwait. Some of the key features include a simpler, better and faster banking experience which is seamless across PC, laptop, tablet and mobile phone. It uses the latest technology that helps customers to identify and search for products and services such as Murabahah, Ijarah, and Tawarruq. The refreshed website also caters to the visuallyimpaired with the use of a “text to speech” feature.

What are the key opportunities you see in the Malaysian market? What are your thoughts on the Islamic banking landscape in Malaysia at the moment?
According to the Islamic Finance in Asia: Reaching New Heights report by the Malaysia International Islamic Financial Centre in collaboration with the Islamic Corporation for the Development of the Private Sector (ICD), Asia’s Islamic financial assets amounted more than MYR 2 trillion, or 26 per cent of the world’s Shariah-compliant financial assets as at end-2017.

That same report pointed out that more than 50 per cent of Sukuk’s worldwide were issued out of Asia and Malaysia continued to be the main driver for both Sukuk outstanding and issuance, with a market share of 51 per cent and 36 per cent respectively at the end of 2017. What this demonstrates is Malaysia’s thriving Islamic banking landscape due to the carefully strategised and crafted roadmap by the country’s central bank and securities commission. The business-friendly policies and enforcement in place ensure Malaysia becomes an attractive hub for both local and international communities to do business.

This is evidenced by the healthy growth of 10.3 per cent by the Islamic banking industry in 2017 compared with 1.7 per cent by conventional banks, as reported by RAM Rating Services. The industry is also entering an exciting phase of value-based intermediation (VBI) where Islamic banking is not merely a matter of principle but will also have a positive impact that is sustainable to the economy, community and environment. At this juncture, nine Islamic banks, including KFH Malaysia, have pledged to adopt VBI into their business strategies.

I believe that Malaysia will continue to play an important role in paving the way for further growth in Islamic banking and will set an example for other countries to emulate. This is possible through unwavering government support, continuous product innovation, a wide range of Islamic investment instruments and adoption of global regulatory and legal best practices. As the first foreign Islamic bank to be granted a license in Malaysia, KFH Malaysia remains committed to shaping the country’s Islamic banking landscape and fulfil the financial aspirations of its people.

What are the challenges facing KFH Malaysia in achieving those opportunities?
No doubt the Islamic banking industry is growing by leaps and bounds. We will certainly need to innovate our products and services in order to stay ahead of the competition, which will benefit the customers as they can pick and choose based on their banking and financing needs. According to RAM, there will also be some form of compression moving forward, as banks compete in the retail and SME deposits space in the lead-up to the net stable funding ratio requirement.

What do you plan to focus on in 2019?
For the past two years, we have been focused on building a solid foundation to relaunch ourselves in 2019 and beyond. For the coming year, we will be exploring financial technology collaborations along with the group in order to continue to add value to our customers’ banking needs, as well as looking at introducing some new innovative Islamic Banking products to the market. We are also looking to emulate the group in the digital banking space to provide a more seamless banking experience to our new and existing customers.

What are some of the key issues you see facing Islamic finance globally?
Islamic finance has been around for just over 40 years now and in terms of global standards is still viewed as a new industry with significant upside potential. It has managed to fend off recent financial crises and continues to grow at a quicker pace that its conventional counterparts. It is constantly evolving as more entrants join the market and more central banks around the world are enhancing their regulatory framework for Islamic finance. One of the challenges is that there is no central or universal authority promoting Shari’ah law and the understanding of what is allowed or not varies among Islamic scholars and jurisdictions.

As a result, there are strong moves afoot by a number of central banks to create a central Shari'ah Board in each jurisdiction which will allow for a more holistic view and the implementation of Shari’ah. Islamic fintech is also something that is new and growing and will need to be partnered with and fully embraced by the industry to realise the full potential that it can bring to the market.

What would you like to see the industry as a whole work towards in order to address those issues?
In order to grow, the industry needs to work hard in coming up with innovative, cutting-edge ideas in terms of products and services. The industry also needs to embrace fintech and the opportunities it provides in Islamic banking. Blockchain has been proven to be very useful toward the growth of Islamic banking especially in the area of remittances and smart contracts as touted by several prominent fintech experts. The industry also needs to collaborate and come up with a common ground when it comes to harmonising a sound Islamic banking model that is truly universal and acceptable for all.

As a leader in the Islamic finance space, what advice do you have for your peers?
We will need to explore the possibility of collaborating with other financial institutions, working together in bringing greater value and efficiencies to our customers and the industry. A lot more awareness and promotion are needed to support and advance the central bank’s agenda in establishing Malaysia as the preferred hub for Islamic banking. We will also need to work closely with agencies and bodies such as Association of Islamic Banking Institutions Malaysia (AIBIM) in order to make this a reality.

What is your personal management style?
I firmly believe in empowerment, open and honest dialogue that fosters discussions and generate new, innovative ideas to improve the customer experience and performance of the bank. I also enjoy engaging all levels of the organisation to build a stronger and more sustainable business for the future working closely with the management team, Board of Directors and Shareholders.  





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